When oligopolistic firms change their pricing strategies, which of the following actions do they typically take?

• A. Always collude openly to fix prices
• B. Ignore competitors and focus solely on their own costs
• C. Consider the potential reactions of rival firms before making a decision
• D. Set prices at the perfectly competitive market equilibrium

Answer: (C)

Verified step by step guidance

1. Understand the nature of oligopolistic markets, where a few firms dominate and each firm's decisions affect the others.
2. Recognize that in oligopoly, firms are interdependent, meaning they must anticipate how rivals will respond to changes in pricing or output.
3. Evaluate why open collusion to fix prices is often illegal or unstable, and why ignoring competitors is not optimal due to strategic interdependence.
4. Learn that firms typically consider the potential reactions of rival firms before changing prices, as this strategic thinking helps avoid price wars or loss of market share.
5. Conclude that setting prices at perfectly competitive equilibrium is unlikely because oligopolies have market power and can influence prices above competitive levels.